U.S. Broadband Homes Without Pay-TV Projected to Hit 58 Million by 2025

The cord-cutting continues. New reported data from TDG Research contends the number of U.S. households with high-speed internet and without pay-TV service will reach 54 million by 2025. The tally was 38 million homes in 2020.

The projection underscores ongoing trends among major pay-TV operators such as Comcast, AT&T and Verizon, which have seen their broadband subscriptions skyrocket while linear-TV subs plummet. Broadband is the pipeline distributing over-the-top video into homes.

Beginning in 2010, just 8% of high-speed internet subs had jettisoned pay-TV. That percentage doubled in 2015, reaching 35% in 2020. A majority of domestic broadband homes with pay-TV is expected by 2026.

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“A decade ago, the [broadband only] segment was comprised almost exclusively of bleeding-edge adopters — those defined by a fascination with new products and services and a pocketbook to fund their experiments,” senior analyst Paul Hockenbury said in a statement. “Today, the BBO segment is largely defined by early-mainstream dispositions: buying only when the price has come down, the technology has peer-demonstrated benefits, and plenty of support is available.”

Interestingly, broadband homes without pay-TV still consume a lot of small-screen entertainment — reportedly just 10% less than the 31 hours consumed weekly by pay-TV households.

Among cord-cutters, about 60% of TV viewing is done via streaming video, which is 50% more than broadband homes with pay-TV. Not surprisingly, Netflix, Amazon Prime Video and Hulu are the top-streamed services among BBO households, with Hulu 10% more popular than high-speed internet homes with pay-TV.

About 66% of broadband-only homes stream AVOD content, with 76% opting for YouTube, compared with 36% for Pluto TV. More than 33% of  BBO homes also use a digital TV antenna, consuming 12 hours of content weekly.

COVID-19 a Push to Cut the Cord

During the pandemic, consumers are sitting at home looking for more visual entertainment than ever before — and evaluating their options. Happily, the disc has gotten a lift as consumers realize the value of the stalwart format, while digital transactional retailers have gained in part by offering premium VOD titles that bypassed or left theaters early.

But, in addition to theaters, one entertainment option that may suffer from COVID-19 is traditional cable, satellite or telco pay-TV. A study from TDG Research found that as virtual MVPD services re-create the offerings of traditional pay-TV, consumers are increasingly seeing less of a need for it. “Most OTT pay-TV services now provide a full complement of both broadcast and cable channels” said analyst Michael Greeson.

Indeed, I am finding it increasingly annoying to sit through commercials on cable that last longer than ads on any AVOD offering and don’t include that convenient countdown to tell you when the torture will end. After scrolling through the numerous cable channels and finding absolutely nothing I want to watch, I am jumping to smart-TV options more and more. The family wants to cut the cord, and the time may be right.

As TDG noted, vMVPD leaders Hulu Live TV and YouTube TV offer the four major broadcast networks, channels that previously helped tie consumers to traditional pay-TV.

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It’s ultimately a flight to quality and value, the same things that have bolstered the transactional home entertainment business since its beginning.

Reports: Netflix Subs Don’t Want More Price Hikes, Open to Ad-Supported Streaming

With Netflix set to release financial results on July 17, two new research reports suggest the SVOD behemoth’s subscribers would consider ad-supported content instead of paying higher monthly fees.

While Netflix doesn’t stream advertising and has made no suggestion it plans to, industry scuttlebutt contends the No. 1 SVOD service might have to consider the option to offset burgeoning content costs and debt.

Recent comments from NBC Universal and Hulu executives have rekindled speculation as to whether Netflix will introduce an ad-based tier. Hulu has always offered a less-expensive ad-supported option, while NBC Universal’s pending streaming service will be both ad-supported and subscription based.

According to new TDG Research, a third of Netflix users would consider changing tiers, more than half of which are moderately likely to or definitely would switch.

While Netflix has consistently spurned ads, the decision is not entirely within its control, according to Michael Greeson, president of TDG and SVP of Screen Engine/ASI.

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Indeed, with two of Netflix’s most-streamed programs — “Friends” and “The Office” — set to leave the platform after 2020, the SVOD service in under increasing pressure to spend on original content to fill the void.

“Netflix’s response to its thinning third-party library is to spend more on originals, which it’s gambling will keep subscribers from jumping ship,” Greeson said in a statement. “But with half or more of its most-viewed shows being owned by three studios, each of which is launching their own DTC services, how long can you convince 55+ million U.S. consumers that your service is worth paying a premium price, especially compared with Hulu (offers an ad-based option), Amazon Prime Video (free with Prime), and Disney+ (coming in a $6.99/month)?”

TDG contends Netflix will need to increase the subscription fees (which it recently did), or create a new revenue stream, such as advertising.

“This should not be an either/or decision, but that’s what it is,” Greeson said.
A separate survey of 1,000 Netflix subs by KilltheCableBill.com found more than 24% of respondents thought their plan was too expensive.

TDG’s research from late 2018 found that Netflix’s most recent price increase strained the limit of the service’s value, even before popular third-party shows are pulled from the lineup.

The research firm contends Netflix could “bullet-proof” its future with the introduction of a less-expensive ad-supported pricing plan.

“The stage is shifting,” Greeson said, “and if, like Blockbuster [Video], Netflix fails to evolve in a timely fashion, the company may see its domestic fortunes reversed.”

Amazon Channels Driving OTT Video Subs as Apple Eyes Market Entry

Amazon Channels, the ecommerce behemoth’s platform selling Prime members access to third-party over-the-top video services, now accounts for 55% all SVOD purchases, according to new data from The Diffusion Group.

The firm found that Amazon Channels was responsible for 70% of a-la-carte sign-ups for Lionsgate-owned Starz and CBS-owned Showtime OTT, among others.

Amazon, which has more than 100 million Prime members globally, shrewdly gets a percentage of revenue subscriptions, including subscriber data, while third-party OTT services shoulder costs for hosting, streaming and customer support.

Media reports suggest about 18% of the U.S. population uses Amazon.

“While Prime Video continues to receive the lion’s share of attention from industry media, Amazon has quietly built a stronghold in the burgeoning direct-to-consumer video market,” Michael Greeson, president of TDG, said in a statement.

And Apple has taken note. The tech giant plans to incorporate a new feature in the app embedded in Apple TV, iPhone and iPad that would afford users access to third-party OTT video apps (with separate subscriptions).

TDG contends this could be a game changer since direct-to-consumer video platform subscriptions are projected to increase 400% over the next five years.

At the same time, only 8% of iTunes transactions involve renting or buying videos, according to Screen Media, with Apple TV generating about 15% market share in the streaming media device ecosystem.

“Apple would have a key advantage over Amazon Channels: it would not require a $120/year membership before [a consumer] can aggregate a-la-carte purchases through its TV app,” Greeson said.